In the last two years I’ve been reviewing numerous business plans from young entrepreneurs looking to raise seed funding for their startups.

Some business plans impressed me by the extent of research made to thoroughly assess a business opportunity. However, a number of business plans failed to capture some important components. Below are some of my observations.

(1)  Business plan contains too many details about technology and insufficient research of the market, competition and customers

A business plan is not a research article and as such there is no need to give in-depth analysis of all features that your technology has. A technology is not attractive commercially unless it solves real problems for many people and thus creates a sizable market opportunity. As a result, I am not convinced that there is a commercial opportunity when a business plan talks about technology features but fails to clearly explain the market opportunity.

(2)   No engagement with potential customers & no primary market research data.

I read many business plans whose market research is limited to relatively generic statistics and forecasts published by data analytics and consultancy firms. There is nothing wrong to use existing market data, but it is in most cases not sufficient.  A startup needs to have a thorough understanding of its market niche and customers. The best way to develop such knowledge is to engage directly with your potential customers. Learn first-hand about problems they have, and how your solution can make their lives easier.

(3)   Unrealistic assumptions

There can be inaccurate assumptions leading to relatively minor mistakes in your estimates of the potential market or pricing for your products or services. However, in your business planning you should not make assumptions which if incorrect can ruin a whole business plan.

 (4)   The market potential is small & thus cannot give sufficient return on investment

I’ve seen business plans which were exceptionally well organised and had all important elements required for execution of a business opportunity. But the market potential was so small that it would be very difficult for investors to get sufficient return. The most important requirement for equity investors is a large market opportunity in a fast-growing industry sector. Otherwise a startup will not be able to achieve a good venture deal.

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Your idea may involve filling an unmet need in the marketplace with a new product or service, providing an existing product in a new form, making improvement to a product available from competitors, or providing an existing product to a new customer group or other ways in which value can be added.  Remember, an idea is only viable if people are willing to pay you for what it provides.

If you are already operating a business listen to your customers and create products or services that better fulfill their needs. Also, talk to your staff as they would often know what works inefficiently, what creates problems and what is too expensive.

Assessment of your business ideas is the first step in developing new business opportunities. When assessing your idea ask yourself what is the problem that this idea will solve? Who will pay for your solution and how much? Talk to other people in the industry or your customers and ask them about their opinion on your business idea.

In today’s fast paced market environment many small businesses and entrepreneurs have a growing need for efficient and affordable evaluation of business ideas for new products and services. Planning4business has developed an Idea Evaluator tool that combines principles from several business assessment methodologies and provides you with an objective evaluation report.

There are several benefits of the Idea Evaluator report. Read How It Works page for an overview of each step involved in the Idea Evaluator process.

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• Executive Summary: a clear overview of your business venture
• Background: in case if you are already operating the business or if you are planning to buy an existing business.  In this section among other things you can include outline of any progress that the business has made to date and details of current ownership structure
• Products and services: features and benefits, current stage of development, proprietary technology and intellectual property. Also, rather than just describing various features of your product and how it works, focus on a vital question: why will people buy your product rather than choose a competing solution? How will your business meet needs of your customers and what drives customer acceptance
• Marketing: industry research, customer research, competitor analysis, pricing strategy, advertising and promotion
• Operations: proposed production plan, procurement, operating complexity and required resources. Include details of any licenses and permits that your business needs to receive or maintain
• Management and organization: your ability to execute on business strategy, set out the structure and pivotal skills of your management team and key staff. Identify any skill shortages and your plans to cover these. Explain your recruitment and training plan, including timescales and cost. If you are launching a startup you will often have limited financial resources to hire staff, and if this is the case explain how you will address any skill shortages
• Milestone events and key risks: Realistic schedule of events, their anticipated timing and interrelationships between the major activities required to build the venture; outline of your contingency plans if the startup does not deliver on critical milestones
• Financials: capitalization plan, use of funds, revenue and cash flow projections, current financial situation. The financial plan is critical to the success of your business, especially if you plan securing a bank loan or equity investment.  In developing your financials be realistic as, for instance, overestimated sales forecasts can lead to increased overheads followed by cash flow problems. Remember that cash flow forecast is arguably the most important part of the financial plan as issues with cash flow can ruin your business. Unrealistic financials in your plan can also damage your credibility, because lenders will become concerned about your ability to identify business risks, your product weaknesses or threats from competition. When making your projections state your assumptions e.g., the basis upon which the revenue and expenses are determined. If you are buying an existing business set out its historical financial information such as income statements and balance sheets during the last three to five years.
• Appendix: Supplementary supporting materials

About 20-25 pages, not including the Appendix, is a good length for a comprehensive business plan. It is important to recognise that markets, competition and your business itself keep changing. Thus, revisiting and updating your plan at least once a year will keep it as relevant benchmark for your business.

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• You will address a number of questions and challenges concerning your business and thus will validate your business concept. Your business plan may uncover significant issues and risk factors making your business idea impractical. It is much less costly to identify significant issues during business planning stage than facing such problems when business becomes operational
• Developing a business plan helps you approach planning of your business in a systematic way. Be flexible throughout this process; while developing the business plan you may come across other concepts, markets, products or services. Additionally, during your business planning you may realize that you are moving in the wrong direction or missing a much larger opportunity. Take time and explore various business alternatives that can maximise your success.

• If you seek capital, you will almost certainly need the business plan. Business plan is an effective tool to convince an angel investor, a venture capitalist or a financial institution about feasibility of your startup or plans for expansion of an existing business
• Well written business plan can help not only present your business concept to others but also inspire experienced mentors and other entrepreneurs who may assist you in starting your business
• The business plan is a reference point for starting and operating your business that helps your measure your planned objectives against the actual performance. How well have you done? Have you met the benchmarks in your business plan?

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In today’s business world, where many new businesses fail within the first few years, it is very reasonable to search for every opportunity to increase your chances for success.  Planning4business offers a range of small business services (include URL) addressing your startup business needs.

Outside business advisors can assist you in making decisions based on facts rather than intuitive guessing. They can also refer you to their business networks and provide insights during and after launch of your small business.

As an entrepreneur, you will want to protect your interest and minimize your business risks. The right time to address these important issues is during the business planning stage. To develop a solid business plan you will need to work with other professionals in accounting, business and law who can assist you in developing risk mitigation strategies and in identifying your best protection options.

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On the other hand, you will need to pay franchising fees and royalties, will have to adhere to a restricted sales territory and will likely experience less freedom in your pricing strategy. As with any opportunity, both advantages and disadvantages must be examined before a decision to invest into a franchise is made.

Once you completed commercial due diligence of the franchise and you remain happy with selected franchise opportunity contact a solicitor specialising in franchising to help you review and negotiate the agreements that will enable your franchise to grow now and in the future. Similarly, if you are attracting a loan the best tool to communicate your proposal to a financial institution is by writing of a business plan that discloses all the changes you will be making in developing your new franchise. Additionally, benchmarking actual performance of your franchise against objectives in your business plan helps you understand how well you are doing.

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You should also perform own due diligence as many business owners want to sell their business because they anticipate unfavorable conditions in the future or because there are some fundamental issues with the business. Make sure that you fully investigate the business and assess its future potential.

When making due diligence ask a lot of questions regarding various aspects of an existing business. Some basic questions may include: Why is the business for sale? What is the business model? What kind of reputation does the business have currently and what is the business’ client base. You will need to carefully review all financial records and understand existing contractual obligations. Using services of a solicitor and an accountant can be helpful in finalizing your evaluation and purchase of the business.

Our company can provide independent review of a business that you consider for investment. We will assess products or services, market, competition, operations and can survey existing customer base.

It is likely that you’ll be making certain changes to the business after acquisition. In case if you are looking to secure a loan or other form of investment it is advisable that at least some sections of a business plan, if not an entire plan, are prepared. Include the business plan with your loan proposal based on what you expect the business will accomplish under your ownership.  As part of your business planning, you may decide to change business’ specific mission and objectives, sales focus, management team, financial forecasts.  Your banker will want to know that you have a viable business plan for operating the business that you are acquiring. For example, if you will be changing the financial structure of the business, this can have major impact on your company. That is why the financial plan is especially important.  Your lender will want to know that the business can be profitable under your financial proposal.

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